Funding Circle Raises $65M to Take on Lending Club

Peer-to-peer lender Funding Circle has raised $65 million in capital in a Series D funding round led by Index Ventures, bringing the company’s total funding to $123 million.

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Accel Partners, Union Square Ventures and Ribbit Capital will also be participating in the new financing round. And Bob Steel, CEO of Perella Weinberg and former Under Secretary for Domestic Finance of the United States Treasury will be joining the Funding Circle board.

The business lending service has lent over $500 million to at least 5,000 businesses in the United Kingdom and United States in the past four years. The company says it is on track to lend $600 million in 2014.

“We will be helping more small business owners grow which means more jobs and economics growth,” co-founder Sam Hodges said. The startup says it will help small businesses “get access to the financing they need to expand and grow.”

Like Lending Club, which is reportedly gearing up for a U.S. IPO, Funding Circle helps small businesses access capital without going through traditional banking services. The companies can borrow directly from investors.

We are seeing a rise in peer-to-peer lending, because “a lot of investors are searching for yield," according to Rohit Arora, CEO of Biz2Credit. “They can make better returns” in this riskier space.

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Launched in the U.K. in 2010, Funding Circle expanded to the U.S. late last year. Funding Circle says it hopes to help reduce the estimated $100 billion small business funding shortfall in the U.S. economy.